Negotiations over the so-called “fiscal cliff” are back in full swing, but the White House and congressional leaders are no closer to an agreement on taxes and spending cuts. Just before Thanksgiving, House Speaker John Boehner told ABC News that he wants ObamaCare, President Obama’s signature domestic policy, put on the table during “fiscal cliff” negotiations. Republicans are also pushing for more transparency in the deal-making process, urging their leadership to put everything out in the open.
Boehner has been pushing the idea of pro-growth tax reform that doesn’t raise rates. That seems like a non-starter since White House and Senate Democrats have made it clear that they want to raise rates for higher-income earners. And unfortunately, some Republicans in Congress are getting anxious about a deal and are abandoning their pledge to constituents not to raise their taxes.
Raising taxes in this economy is a bad idea. Just two years ago, President Obama supported extending tax rates for another two years because he realized that the economy would struggle even more if tax rates suddenly changes. The economic climate isn’t much better today.
Michael Tanner, a senior fellow at the Cato Institute, recently explained that raising taxes on the rich isn’t going to balance the budget:
Written by Chip Knappenberger, Assistant Director of the Center for the Study of Science at the Cato Institute. Posted with permission from Cato @ Liberty.
There seems to be a noticeable murmur around town about a carbon tax—a tax on the amount of carbon dioxide that is released upon generating a unit of energy. Since fossil fuels—coal, oil, natural gas—are both the source of over 75% of our energy production and emitters of carbon dioxide when producing that energy, a carbon tax insures that the price of everything goes up.
There is one and only one justification for a carbon tax—an attempt to influence the future course of the earth’s climate (or, as some people prefer, to mitigate anthropogenic climate change) by trying to force down the emissions of the most abundant human-generated greenhouse gas.
But of all the things that a carbon tax will do (raise prices, increase bureaucracy, elect Tea Partiers, etc), mitigating anthropogenic climate change in any meaningful manner is not one of them.
The annual carbon dioxide emissions from the U.S., currently about 5,500 million metric tons per year, only contributes roughly 0.003°C/per year of warming pressure on global temperatures (see here for a handy way of making that calculation). So the best that a carbon tax could ever hope to achieve, climatically, would be to prevent this amount of warming each year by completely eliminating all carbon dioxide emissions from the U.S.
On Friday, President Barack Obama sat down with congressional leaders, including House Speaker John Boehner, to discuss avoid the so-called “fiscal cliff,” automatic tax hikes that would come from the expiration of the 2001 and 2003 tax cuts and spending cuts that were signed into law last year as part of the debt ceiling deal.
All sides left the table believing that a deal was possible, though it doesn’t seem like they’re going to have time to get something comprehensive done by the end of the year:
In a signal to financial markets that have fallen precipitously since Obama’s election last week, Speaker John Boehner (R-Ohio), House Minority Leader Nancy Pelosi (D-Calif.), Senate Majority Leader Harry Reid (D-Nev.) and Senate Minority Leader Mitch McConnell (R-Ky.) expressed confidence they would reach a deal.
The four all appeared outside the White House after the meeting as a group to telegraph their seriousness and unity to the markets and the public.
“We all know something has to be done … we feel very comfortable with each other and this isn’t something we’re going to wait until the last day of December to get it done,” Reid (D-Nev.) said. “We have a plan. We’re going to move forward on it.”
Boehner said the parties had developed the “cornerstones of being able to work something out.”
Democrats, meanwhile, expressed a willingness to consider spending cuts despite heavy lobbying from union and senior groups, who argue Medicare and Social Security should not be touched.
Written by Marian Tupy, a policy analyst, Center for the Global Liberty and Prosperity at the Cato Institute. Posted with permission from Cato @ Liberty.
It has been said of the neo-cons that they are often wrong but never in doubt. Well, Bill Kristol was at it again, predicting the future with his usual sense of supreme confidence. According to the neo-conservative editor of the Weekly Standard, “It won’t kill the country if Republicans raise taxes a little bit on millionaires… .The Republican Party is gonna fall on its sword to defend a bunch of millionaires, half of whom voted Democratic, and half of whom live in Hollywood and are hostile to Republicans.”
The left has jumped on Kristol’s words. As Andrew Rosenthal wrote in the New York Times, “When even Bill Kristol, the severely conservative Weekly Standard editor, says Republicans should agree to raise taxes on the richest Americans, you have to wonder if the G.O.P. has thought through its post-election, hold-the-line strategy.”
To start with, Kristol misunderstands the opponents of the tax increases on the rich, whose main goal is not to ensure that the rich get to keep more of their money. Their main goal is to prevent the federal government from obtaining a new source of revenue. Why might that be?
During a press conference yesterday afternoon, President Barack Obama laid out some of his terms on the so-called “fiscal cliff,” making it known that he wouldn’t accept a deal with House Republicans that didn’t raise tax rates on higher-income earners. Before the press conference even took place, the White House had rejected House Speaker John Boehner’s initial offer and The Hill noted that Obama would come to the table asking Congress for “$1.6 in new revenues by targeting the wealthy and corporations.”
Boehner, who has said that the talks with the White House are “going to take awhile,” has already said that House Republicans aren’t willing to raise tax rates, which could bring the talks to an impass. During the press conference, Obama said, “I’m open to compromise and I’m open to new ideas.” But, as noted, Obama has already turned away one offer for increased revenues and isn’t likely to budge much from his position.
James Pethokoukis noted that Obama’s tax plan, which supposedly brings a “balanced approach” to the deficit, isn’t balanced (emphasis mine):
[O]nce you begin to dig into the numbers, the plan doesn’t look balanced at all. As the bipartisan Committee for a Responsible Federal Budget noted back then:
With a compromise on the so-called “fiscal cliff” up in the air, investors are showing signs of worry. According to CNBC, many are working to sell off assets to avoid the coming hikes in the capital gains tax that will come at the beginning of the year:
For many of the wealthy, 2012 is becoming a good year to sell.
They’re worried about the “fiscal cliff,” which is when tax cuts expire and spending cuts are set to go into effect at the end of the year.
Fearing an increase in capital gains and dividend taxes, many of the rich are unloading stocks, businesses and homes before the end of the year.
Wealth advisors say that with capital-gains taxes potentially going to 25 percent from 15 percent, and other possible increases in the dividend tax, estate tax and other taxes, many clients are selling now to save millions in taxes.
If the Bush-era tax cuts expire, taxes on capital gains would revert back to its previous rate of 20 percent from its current 15 percent. Another 5 percent may be added from health-care levies and changes in itemized deductions, bringing the rate to 25 percent for many high earners.
Taxes on dividends could go from 15 percent to over 43 percent. And the estate tax could go from 35 percent on estates worth more than $5 million to 55 percent on estates over $1 million.
For the Sake of Intellectual Integrity, Republicans Should Not Cite the CBO When Arguing against Obama’s Proposed Fiscal-Cliff
Written by Daniel J. Mitchell, a senior fellow at the Cato Institute. Posted with permission from Cato @ Liberty.
I’ve commented before how the fiscal fight in Europe is a no-win contest between advocates of Keynesian deficit spending (the so-called “growth” camp, if you can believe that) and proponents of higher taxes (the “austerity” camp, which almost never seems to mean spending restraint).
That’s a left-vs-left battle, which makes me think it would be a good idea if they fought each other to the point of exhaustion, thus enabling forward movement on a pro-growth agenda of tax reform and reductions in the burden of government spending.
That’s a nice thought, but it probably won’t happen in Europe since almost all politicians in places such as Germany and France are statists. And it might never happen in the United States if lawmakers pay attention to the ideologically biased work of the Congressional Budget Office (CBO).
The debate over the “fiscal cliff,” particularly the tax hike for higher-income earners being push by President Barack Obama, is one that is based on an entirely false premise. The argument from Obama and Senate Democrats is that these taxpayers need to pay more to help bring the budget back to a sustainable path. However, the Wall Street Journal explains that tax revenue has been climbing and the real issue is that spending has gotten out of control under Obama:
The nearby table lays out the ugly details. The feds rolled up another $1.1 trillion deficit for the year that ended September 30, which was the biggest deficit since World War II, except for each of the previous three years. President Obama can now proudly claim the four largest deficits in modern history. As a share of GDP, the deficit fell to 7% last year, which was still above any single year of the Reagan Presidency, or any other year since Truman worked in the Oval Office.
Tax revenue kept climbing, up 6.4% for the year overall, and at $2.45 trillion it is now close to the historic high it reached in fiscal 2007 before the recession hit. Mr. Obama won’t want you to know this, but this revenue increase is occurring under the Bush tax rates that he so desperately wants to raise in the name of getting what he says is merely “a little more in taxes.” Individual income tax payments are now up $233 billion over the last two years, or 26%.
Now let’s look at outlays, which declined a bit in 2012. That small miracle was achieved thanks to a 4% fall in defense spending, a 24% fall in jobless benefits, and an 8.9% decline in Medicaid spending.